America, Home of the Brave

“Americans” aren’t a particularly smart bunch. Our offspring are among the stupidest worldwide. It’s pretty easy to trick us. We’re too busy to read the fine print. We would rather pay less now, no matter how much it will cost later. Credit card debt, Columbia House, and the Ab Rocker are a testament to that fact. EBay has figured this out and takes advantage of our collective inability to reason and process calculations in our brains every chance it gets. EBay isn’t alone. All publicly traded companies are out to extract as much revenue as possible. Today’s “Lowest Fees Ever” announcement is just another example of eBay cleverly masking fee increases and complicated changes with propaganda and slick headlines.

The Five Free Insertion Fee Scam

Several months ago, eBay came out with their most successful “fee decrease that’s actually an increase” yet. The way you can tell if an eBay “sale” is a good one is by how much time they give you to prepare for it and how long it lasts. This is true of most stores. “Black Friday” ads, for example, come out on Thanksgiving Day and the best deals usually only last a few hours on Friday. Prices found on page nine of the weekly Best Buy Ad in August are rarely as good. When eBay announces a one day sale, often times less than 24 hours before it starts, there’s a good chance there might actually be some savings. I still don’t recommend listing during eBay promotions, because they’re usually run during the slowest times of the year and eBay is usually flooded with crap, but at least there’s a decent opportunity to list some items with potential savings. The way we know the “Five Free Insertion Fee” promotion is a sour deal for sellers is because it’s lasted for almost a year. EBay is not in the business of losing money and there is an ulterior motive behind every listing promotion and policy change.

Although the “up front” cost of these “free listings” is zero, the final value fee of 8.75% almost always makes these listings more expensive than had the seller simply paid the regular insertion and final value fees. Ask yourself this question. Would I rather pay 3.5% in taxes or 8.75% in taxes? Unless you really love supporting public education, the answer is 3.5%. On eBay’s “five free listings” you’re paying the 8.75% rate on those listings when you could be paying 3.5% instead. Read all about the particulars if you’re interested at EBay’s Five Free Listings Promotion Costs Sellers More Money. Oddly enough, probably 97% of people listing on eBay think that the “free insertion fee promotion” is one of the best deals on the internet.

Changes to Auction Pricing

EBay is touting its new fee structure for auctions as “easy” because final value fees are 9% no matter the closing price. This is different than the current structure, where final value fees decrease as auction price increases. For example, if your item sold for $50, the final value fee on the amount from $0-$25 is 8.75%, or $2.19 and the final value fee on the amount from $25.01 to $50 is 3.5%, or 88 cents. Confusing, I know. Although the current variable rate structure is certainly more complicated than a flat rate, it is also much cheaper than a flat rate, as 3.5% is obviously much less than 8.75%. I would rather be confused and pay less than be enlightened and pay more. There’s also plenty of fee calculators out there that will tell you exactly how much your PayPal and eBay fees will be in any possible scenario. Here’s a chart I stole from eBay User exclusively_red_tag showing the new final value fees compared with the current fees.

As we can see, the new final value fees are as much as 141% higher than the old fees. If you sold say, 100 items a month for an average of $50, your new final value fees would add up to $450, or 9% of your $5000 revenue. If you sold the same amount of items under current conditions, your final value fees would add up to $306, or 6.12%. There is no way to make up this $144 difference in insertion fee savings. Multiply that $144 a month by 12 months in a year and you have a fee increase of $1728 annually. No vacation in 2010.

I guess I should mention that sellers without an “eBay Store” will have the insertion fee waived on up to 100 listings that start at 99 cents or less. Listings that start at 99 cents or less cost a whopping 10 to 15 cents each at current prices. The total potential savings on insertion fees for a seller that lists all 100 “free” items at 99 cents or less is $15. Based on the chart above, it’s not particularly difficult to rack up an extra $15 in final value fees on just a single item. This would negate any potential savings instantaneously.

But There Is Another Fee Structure Too

If the new fee structure is “easy” then that means the old fee structure, used for the last decade plus, was uneasy. Luckily, eBay will let us continue to use the more complicated, uneasy fee structure. For a price. EBay store subscribers have a separate final value fee structure for auctions that looks conspicuously similar to the old structure. Of course, these fees have also gone up, but not nearly as much. Does it seem like this is starting to get a little complicated to anyone else? Multiple fee structures? “Free” listings for some, but not for others? Paying money for a store subscription merely for the chance at saving money in fees? Things are starting to get a bit more interesting.

This is what auction final value fees will look like for store subscribers come April:

Let’s compare that with the current chart.

EBay is being even trickier than usual with this little picture. If you look closely, eBay has expanded the 8.75% final value fee level from $25 all the way up to $50. This means that instead of paying the current 3.5% on the price from $25.01-$50, you’ll be paying the full 8.75% fee. Remember our $50 item example from earlier, where the first $25 cost $2.19 in fees, but the second $25 only cost 88 cents? In April, each $25 increment will cost $2.19, for a total fee of $4.38, instead of the current $3.06. The final value fee is also going up one half percent to 4% over $50 and 2% over $1000.

Let’s look at the stolen chart to see how this affects listings beginning in April.

At least there aren’t any numbers in the triple digits. Unfortunately, the percentage increase is the highest on auctions ending between $25 and $50. Many of the items I sell fall into this range, as I have found it’s a sweet spot for many buyers who aren’t willing to spend any more on a site full of fraud and counterfeits. EBay is a bit like gambling; never buy something for more than you’re willing to throw away.

When Opening An EBay Store Make Sense

It seems that subscribing to an eBay store is going to make a lot of sense here pretty soon. I will go over the benefits of the store subscription along with the potential fee savings and costs in the next couple of days.

Conclusion

I think this is the greatest fee hike I’ve ever seen. What’s annoying is that somehow eBay plays it off like their fees are getting lower – and people believe them. When is the last time Starbucks raised prices 141% and somehow managed to convince people the prices were their lowest ever? I’m not a big whiner, but I don’t like being treated as though I’m as stupid as my aptitude tests say I am.

We know eBay’s “fee decrease” is really an increase. We know nothing eBay ever does is in our best interest. But you’ve got to give them credit. The “royal we” seems to be getting smaller and smaller.

2 Responses to “Spring 2010 Fee Update – EBay Thinks We Won’t Notice”

“Review the new fee options carefully. If you currently have an eBay Store, understand how your fees will change when your Store Inventory Format listings become regular Fixed Priced listings.”

It is important to note that the $50 cap on Final Value Fees for Auction listings does NOT appear to apply to the Stores subscriber’s Auction listings.

Here is another “GOTCHA” moment:
“If you downgrade your Stores subscription level, the lower subscription level will become effective immediately. However, you will continue to pay the applicable fees at your current level until after the minimum of 30 days at the higher tier has passed.”